A window of opportunity

The EU backs reform and investment in Lebanon

Photo by: Greg Demarque/Executive
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Executive met with Christina Lassen, head of the Delegation of the European Union to Lebanon, to discuss the challenges Lebanon is facing, what to expect from the upcoming CEDRE investment conference and Brussels II refugee aid conference, and the outcomes of last month’s Rome security conference.

E   It is an interesting time for Lebanon, given that we have the first opportunity in many years to look at major infrastructure investments with real promise for their realization. As the European Union appears to be a very interested stakeholder in this scenario, let me ask: What is the EU’s official perspective on the Capital Investment Program [CIP] that Lebanon has recently presented?

I think there is a window of opportunity for Lebanon right now. There is international goodwill to support the stability of this country that is perhaps not unprecedented in recent years. At the International Support Group meeting in Paris last December, there was a roadmap laid out for focusing on different aspects of this country’s stability in terms of security, growth of the economy and creation of jobs, and the issue of refugee response.

One of the main pillars for the Lebanese government is the focus on the country’s run-down infrastructure, which—as the government says—has not seen the right investments for decades. Some investments in infrastructure were done after the civil war [in the 1990s], but the level of public investment in infrastructure has been extremely low over the past 10 years or more. There now is a chance with this renewed focus on [infrastructure investments].

The government’s logic behind infrastructure investments is to create jobs and get the economy back on track. The international community has accepted this logic, and we have been looking forward to receiving the formal presentation of the government’s vision, which was finally released [on March 15]. We are now preparing for the [CEDRE] conference in Paris. We now have this package of investments into different infrastructure projects, and at the same time, there is a very important document on the government’s economic vision that contains a broad range of structural and sectoral reforms. We expect a lot from this package, meaning if this is to succeed, achievements have to be made on both sides of the coin.

[CEDRE] is an investment conference. It is not a donor conference. That is why it is not so important what the EU’s official position is. We are positive and, as the saying goes, the EU is open for business, but to that end, investments will depend on private investors and international financial institutions [IFIs]. They need to assess all these projects. Are the projects viable? Do they make sense, in terms of promoting sustainable growth and employment? Are they profitable? They will look at them as investments, and the more economic and structural reforms the government carries out, the more the [investors and institutions] will be interested in investing.

This is where we can [pitch] in and help. What the EU has at hand is to provide assistance that makes these loans more concessional and have better terms. But it has to be attractive to the private sector and the IFIs. This is why we are encouraging the government to carry out the reforms that would make the investments more viable. I think everybody agrees with this logic, and this is also what the [government of Lebanon] says that they want to do, so there is now a chance to have these infrastructure investments, but very importantly, also to have these economic reforms that this country, as everybody acknowledges, has been lacking for a long time.

E   How much leverage do you see the EU as having to incentivize the political establishment in Lebanon to implement the reforms?

It is not what we want, but what is in the country’s interest. A very important point that the French hosts of this conference have proposed, and the government here [in Lebanon] is also talking about, is that there has to be a very clear and effective follow-up mechanism. We will all see what is being proposed now in Paris, and then there will be a follow-up mechanism where everybody can regularly assess what is going on, on both the reform and the investment sides. In terms of leverage, the leverage is, again, with the investors. If the IFIs are to be interested [in financing infrastructure projects in Lebanon] they want to see those reforms. We are not at all talking about conditionality here. Investors want to make sure that they are getting something in return.

E   When were you given access to the CIP document?

All the documents were released on the 15th of March. It has been only a few days, and that is why everyone is now studying [the document], especially the IFIs.

E   Is that not a very short time to go through an extensive document of some 130 pages and study the CIP, which outlines numerous projects in areas such as transport and water on about 50 pages each, in time before the Paris conference?

I think everybody acknowledges that this is the beginning of a process. That is what the government is also saying. They are hoping for positive statements of intent and [financial] commitments, but also commitments to look through this [CIP] with a very open mind, and I think this is what everybody wants. The international community cares about stability in this country, and that is [demonstrated by the interest in CEDRE]. Not every country can get 60 countries to come to a big investment conference. There is a special case here because of the situation of this country. It is the beginning of a process, and yes, it is a short time [to review the documents and projects], and we said it would have been good to get the documents earlier, but we also understand that there has been a huge effort from the Lebanese side to get all of this together. In the Lebanese political system, things take time, and the Council of Ministers has now approved this document, which is a very good development.

E   If I understood correctly, you said that the infrastructure projects and the reforms in Lebanon are seen by the EU very much as parts of one package. In your view, do the Rome and Brussels conferences on security and refugee issues constitute parts of this overall package for development?

We see them as part of the overall roadmap to stability. In this context, it was important to have the Rome conference. It was dealing with investments into the Lebanese security sector, and I think everyone was very impressed with the developments that have been achieved, especially with the Lebanese Armed Forces, but also the other security agencies over the previous years. This conference sent a very strong political signal of support from the international community for Lebanon’s state institutions in the security sector, and also toward helping them to continue these reforms and improvements and capacity building. As the prime minister has said, security and stability is a prerequisite for attracting the investments the government is proposing in the CIP. In that sense, there is a clear link between investments in security and economic growth.

Brussels II is not a conference that will be focused on Lebanon alone, but on the question of the Syrian refugees in the region and also inside Syria. So I think there is a strong link between all three conferences, but they all focus also on different aspects.

E   What is the ratio of support between before the crisis and today, if you compare funding provided under the European Mediterranean Neighborhood Program before the crisis, and the engagement in the past few years, since the crisis erupted?

Before, many of our member states [in the EU] said that Lebanon was not a developing country according to our norms, and we would not have any programs here. Of course, we as the EU were always engaged [with Lebanon], but if you look at our support to Lebanon before the crisis, we were giving around 35 to 40 million euros a year. For the last three years, we have been giving between 280 and 340 million euros a year, so it is a huge increase.

I often hear frustration that Europe is not doing enough, but I think that most people realize deep down that we are here to help and will continue to do so as long as this crisis is going on. And that is why the High Representative [of the European Union for Foreign Affairs and Security Policy, Federica Mogherini,] is hosting the conference in Brussels at the end of April, to make sure that not only the European Union but the whole international community does not lose sight of this crisis. She wants the international community to focus on the need for political solutions [to the Syrian crisis] through the UN track, but also very much—and that is of course what we also focus on from here—on not forgetting the huge needs of [Syria’s] neighboring countries. This is very important, even as we keep in mind that there are many crises in the world right now, and that there is huge pressure on humanitarian support budgets. This crisis is still going on, and we need to continue supporting as long as that is the case.

Jeremy Arbid

Jeremy is Executive's former economics and policy editor.